High sugar prices set to take a bite out of Mr Kipling owner's profits

 
Alys Key
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High sugar prices are pushing up costs for the food company (Source: Getty)

Mr Kipling owner Premier Foods is likely to report a slump in profits this week, as the rising cost of sugar and other ingredients eats into its margins.

The food company is on track to report profits 10 per cent lower than it had hoped, following a profit warning in January in which it blamed the higher prices of wheat, sugar, butter and palm oil.

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Consensus estimates from Bloomberg suggest that profits could decline as much as 12 per cent to £115m from £131m last year. Pre-tax profits are predicted to decrease from £86.1m to £52.2m.

But sales at the company, which owns a range of well-known food brands including Bisto and Ambrosia, are expected to edge up from £771.7m to £790.6m.

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Analysts at Credit Suisse also noted the importance of the extension of the Cadbury Cake license, which means Premier Foods will continue to make Mini Rolls and other favourites until at least 2022. The news last week sent Premier Foods' share price up almost three per cent, with Credit Suisse estimating that sales of the products will come in at £70m

It also managed to secure a £32m cash boost after it came to an agreement with the trustees of its pension scheme that "significantly reduces the group's cash outflow over the next three years".

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